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Japan's postwar occupation and the economic boom in the 1950's

Written by Maciamo on 15 May 2004

When Japan surrender to the United States in August 1945, the Americans started occupying the country with main purpose to demilitarize and democratize.

In order to obtain the support of the population and assure a smooth transition, the US decided to retain the Imperial institution, although the emperor would lose his divine status. Women were immediately given universal suffrage, which also proved very popular.

The Communist party became legal for the first time in Japan. The occupational forces thought of dismantling zaibatsu (financial combines), which they saw as the money-bags behind the military. They also wanted to decentralize education systems and the police, so as to weaken the power and influence of the central government. Nevertheless, the Americans did not care very much about Japan's economic recovery, and let it up to the Japanese to care about it.

When the Cold War began and China's Communists routed the Nationalists, the US government feared that the movement would spread to Japan and set on a "reverse course" in 1947. They sharply scaled back their plans to dissolve subsidiaries of the zaibatsu, relinquished their claims to war reparations, then initiated a crackdown on Japanese Communists and pushed for the creation of a national police. Instead of having to pay war reparations to Britain and most Asian countries, the US arranged commercial treaties for Japan with countries such as the Philippines.

While the postwar inflation resulted in a total augmentation of of 15.000% from 1945 to 1949, the United States were now committed to solve Japan's economic problems. Japan's economy was to be cured by imposing three harsh measures : a balanced budget, the suspending of all state loans to industry, and the abolition of all state subsidies. The yen was set to a favourable rate of 360 for 1 US$ to stimulate exports.

But as these new regulations put tremendous stress on the Japanese economy, nearly drawing it into depression, the Korean War commenced. This misfortune for the ones, became a great fortune for the others. Americans military procurements surged. Orders from Japan amounted to two billion US$ between 1951-53, approximately 60% of all its exports. Large companies amassed profits for the first time since the end of the war and Japan's GDP soared like never before.

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